Wednesday, December 12, 2007

The art of splitting hair?

As long as there is property, inheritance, money, ego and ambition, business families will continue to split. Given their size and the profile that they enjoy in public imagination, the Ambani brothers have been getting more than their fair share of publicity and gossip. If one looks at the whole issue objectively, there is no doubt that stakeholders have benefitted immensely after the two brothers agreed to a split arranged by ICICI Bank boss K. V. Kamath and morally presided over by the matriarch of the family Kokilaben Ambani; the widow of Dhirubhai. Around the time the two brothers split, the Reliance Industries share was hovering in the range of Rs.700 or so for a while. There were many so-called pundits who sniggered when it was suggested that a split between the two and a clear division of functions and ‘assets’ will lead to unlocking of shareholder value. As usual, the pundits were wrong and the Reliance share that was worth about Rs.700 in 2005 is worth more than three times that figure!

No wonder, the Ambani brothers, despite their personal feuds, have retained the loyalty of the stock market investors in the country and beyond. Something totally different seems tobe happening with the proposed split in the Bajaj family; a controversy that has been raging for many years now. Just recently, after many battles with Sishir Bajaj that have been made public, Rahul Bajaj announced a separation offunctions and responsibilities between even his own sons Sanjeev and Rajeev Bajaj. In effect, the Bajaj patriarch announced that one son will lead the automobile business while the other one will control the financial services business. Despite this seemingly pragmatic separation imposed well on time by the elder Bajaj, investors in the market have not taken well to the split, nor do they see any unlocking of value in the near future as Sanjeev and Rajeev go their own separate ways.

In fact, the share price of Bajaj Auto has dropped after the split was announced recently! Ranbaxy is yet another inheritance that has seen bruising and controversial battles between inheritors. This is a battle in which uncle is pitted against nephew; with the genesis of the battle going back to the early 1990s, when Dr. Parvinder Singh, who spearheaded the rise of Ranbaxy, orchestrated the ouster of his own father Bhai Mohan Singh from the company, when the latter opposed Dr. Singh’s plans to take Ranbaxy global. Bhai Mohan Singh bequeathed many of his assets to the other son Bhai Analjit Singh, the uncle of Malvinder Singh, who now heads Ranbaxy. Indeed, Indian business families have had quite serious split personalities!